Bobbiealain
Questions Based on this case and the two previous Graeter’s cases…
Questions
Based on this case and the two previous Graeter’s cases (listed below), what are the company’s most important strengths? Can you identify any weaknesses that might affect its ability to grow?
How would you describe the departmentalization and the organizational structure at Graeter’s? Do you think Graeter’s is centralized or decentralized, and what are the implications for its plans for growth?
The newest Graeter’s plant can produce far more ice cream than is needed today. The company also makes ice cream cakes, pies, toppings, and other products at its other plants. What are the implications for Graeter’s strategy and for its operational planning?
Case Study
Graeter’s Grows Through Good Management, Organization, and Quality
Graeter’s began as a tiny Cincinnati business and now enjoys a national reputation for the quality of its premium ice cream. Once a small local business, today Graeter’s has a state-of-the-art factory, ships ice cream and other products across the United States that are sold in major supermarkets, and has an e-commerce site where customers can order merchandise online. All of these production and marketing activities helps Graeter’s to generate more than $125 million in sales each year. Even though the company is expanding, it still clings fiercely to its original small-batch production method for making creamy ice cream from fresh ingredients. CEO Richard Graeter emphasizes that profits are important, but “staying true to who you are and investing in your business is what makes sure that your business is going to be here tomorrow.” That’s why Graeter’s still makes all of its ice cream by hand, ensuring that the texture and taste meet its high standards batch after batch, year after year.
More Than a Family Affair
Graeter’s top-management team includes the CEO and two additional fourth-generation Graeter family members. Bob Graeter is in charge of operations and quality assurance. Bob is responsible for manufacturing, as well as for developing new products and finding suppliers to provide ingredients such as fresh fruits, cream, eggs, and chocolates. Chip Graeter oversees all of the company’s retail operations. Rounding out the management team are a chief operating officer, a vice president of sales and marketing, a vice president of operations, a plant manager, a controller, and consultants that help the company plan for expansion.
“Every major decision, we make on a consensus basis,” Richard says, describing the equal partnership among the three family members. “That doesn’t mean we don’t have a different point of view from time to time, but … we learn to see each other’s view and discuss, debate, and get down to a decision that all of us support. The other thing that we have learned to do, something that is a little different than our parents’ generation [did], is bring in outside people into the … executive level of the management team… We now work with consultants to help us plan our strategy to look for a new vision, to develop training programs … all those systems that big companies have.” Even with growth and expansion, executive-level managers still stay in close contact with employees at all levels and don’t hesitate to ask for their input when solving problems and making decisions.
Inside the Org Chart
Graeter’s formalized its organization structure over the years as it opened more stores and expanded beyond Cincinnati. Today, the store managers report to a group manager, who in turn reports to the vice president of retail operations. Graeter’s sets weekly and monthly sales goals for its stores, based on each unit’s location and other factors that affect demand. If a store doesn’t meet its goals, the group manager acts quickly to find out why and to help the store get back on track. To make sure employees and store managers are providing great customer service, managers “shop” each store every month, checking on quality and service. These management visits are supplemented by two monthly visits from “mystery shoppers” who buy ice cream and other products on different days, observing what employees are doing and taking note of what else is happening in the store. Their written reports give Graeter’s top managers another view of the business, this time from the customer’s perspective.
At the company’s main production facility, employees in each of three shifts are supervised by a shift manager, who reports to the vice president of operations. The first and third shifts are responsible for ice cream production, while the second shift is in charge of cleaning and sanitizing the facility.
What’s the Plan?
For a small business like Graeter’s, changes often come quickly, and even with robust planning for the future, there are surprises. A while back, the company was constructing its second factory to support the drive for nationwide distribution when an unexpected opportunity arose: to buy out the last franchise company operating Graeter’s retail stores and take over its factory as well. The management team jumped at the chance. “A few months ago, our strategy was just operate one plant,” says Richard. “Now our strategy is, adapt to the opportunity that came along. Now, the goal is to make the best use of our assets.” The newest Graeter’s facility, on Regina Graeter Way in Cincinnati, was built with the capacity to produce as much as 1 million gallons of ice cream per year. Many steps, such as putting lids on packages and moving them into refrigerated storage, are handled by automated equipment. Yet all of the ice cream is still made in small batches and by hand. Experienced technicians wield a paddle to gradually mix in ingredients such as molten chocolate, which have been pasteurized on the premises to comply with government regulations. Once the ice cream reaches the right temperature and texture, another employee hand-packs it into individual packages, which are then automatically capped, stamped with a date code, sealed, and whisked away to be kept cold until being loaded onto trucks for delivery to supermarket customers. Ice cream samples from every shift’s output are tested to ensure purity and quality.
As the company explores the possibility of opening Graeter’s stores as far away as Los Angeles and New York and selling more ice cream and other products in new markets, the management team is planning carefully and assessing the potential challenges and advantages of coast-to-coast operations.*
Let’s Go Get a Graeter’s!
Only a tiny fraction of family-owned businesses are still growing four generations and more than 150 years after their founding, but happily for lovers of premium-quality ice cream, Graeter’s is one of them.
Now a nearly $125 million firm with national distribution, Graeter’s was founded in Cincinnati in 1870 by Louis Charles Graeter and his wife, Regina Graeter. The young couple made ice cream and chocolate candies in the back room of their shop, sold them in the front room, and lived upstairs. Ice cream was a special treat in this era before refrigeration, and the Graeters started from scratch every day to make theirs from the freshest, finest ingredients. Even after freezers were invented, the Graeters continued to make ice cream in small batches to preserve the quality, texture, and rich flavor.
After her husband’s death, Regina’s entrepreneurial leadership became the driving force behind Graeter’s expansion from 1920 until well into the 1950s. At a time when few women owned or operated a business, Regina opened 20 new Graeter’s stores in the Cincinnati area and added manufacturing capacity to support this ambitiousand successful growth strategy. Her sons and grandchildren followed her into the business and continued to open ice-cream shops all around Ohio and beyond. Today, three of Regina’s great-grandsons run Graeter’s with the same attention to quality that made the firm famous. In her honor, the street in front of the company’s ultramodern Cincinnati factory is named Regina Graeter Way.
The Scoop on Graeter’s Success
Graeter’s fourth-generation owners are Richard Graeter II (CEO), Robert (Bob) Graeter (vice president of operations), and Chip Graeter (vice president of retail operations). They grew up in the business, learning through hands-on experience how to do everything from packing a pint of ice cream to locking up the store at night. They also absorbed the family’s dedication to product quality, a key reason for the company’s enduring success. “Our family has always been contented to make a little less profit in order to ensure our long-term survival,” explains the CEO.
Throughout its history, Graeter’s has used a unique, time-consuming manufacturing process to produce its signature ice creams in small batches. “Our competition is making thousands and thousands of gallons a day,” says Chip Graeter. “We are making hundreds of gallons a day at the most. All of our ice cream is packed by hand, so it’s a very laborious process.” Graeter’s “French pot” manufacturing method ensures that very little air gets into the product. As a result, the company’s ice cream is dense and creamy, not light and fluffyso dense, in fact, that each pint weighs nearly a pound.
Another success factor is the use of simple, fresh ingredients like high-grade chocolate, choice seasonal fruits, and farm-fresh cream. Graeter’s imports some ingredients, such as vanilla from Madagascar, and buys other ingredients from U.S. producers known for their quality. “We use a really great grade of chocolate,” says Bob Graeter. “We don’t cut corners on that … Specially selected great black raspberries, strawberries, blueberries, and cherries go into our ice cream because we feel that we want to provide flavor not from artificial or unnatural ingredients but from really quality, ripe, rich fruits.” Instead of tiny chocolate chips, Graeter’s products contain giant chunks formed when liquid chocolate is poured into the ice-cream base just before the mixture is frozen and packed into pints.
Maintaining the Core of Success
Graeter’s “fanatical devotion to product quality” and its time-tested recipes have not changed over the years. The current generation of owners is maintaining this core of the company’s success while mixing in a generous dash of innovation. “If you just preserve the core,” Bob Graeter says, “ultimately you stagnate. And if you are constantly stimulating progress and looking for new ideas, well, then you risk losing what was important…. Part of your secret to long-term success is knowing what your core is and holding to that. Once you know what you’re really all about and what is most important to you, you can change everything else.”
One of those “important” things is giving back to the community and its families via local charities and other initiatives. “Community involvement is just part of being a good corporate citizen,” observes Richard Graeter. When Graeter’s celebrated a recent new store opening, for example, it made a cash donation to the neighborhood public library. It is also a major sponsor of The Cure Starts Now Foundation, a research foundation seeking a cure for pediatric brain cancer. In line with its focus on natural goodness, Graeter’s has been doing its part to preserve the environment by recycling and by boosting production efficiency to conserve water, energy, and other resources.
Graeter’s Looks to the Future
Even though Graeter’s recipes reflect its 19th-century heritage, the company is clearly a 21st-century operation. It has more than 200,000 Facebook “likes,” connects with brand fans on Twitter and Instagram, and invites customers to subscribe to its email newsletter. The company sells its products online, shipping orders via United Parcel Service to ice-cream lovers across the continental United States. Its newly opened production facility uses state-of-the-art refrigeration, storage, and sanitationyet the ice cream is still mixed by hand rather than by automated equipment. With an eye toward future growth, Graeter’s is refining its information system to provide managers with all the details they need to make timely decisions in today’s fast-paced business environment.
Graeter’s competition ranges from small, local businesses to international giants such as Unilever, which owns Ben & Jerry’s, and Froneri, which owns Haagen-Dazs. Throughout the economic ups and downs of recent years, Graeter’s has continued to expand, and its ice creams are now distributed through 4,000 stores in 46 states. Oprah Winfrey and other celebrities have praised its products in public. But the owners are just as proud of their hometown success. “Graeter’s in Cincinnati is synonymous with ice cream,” says Bob Graeter. “People will say, ‘Let’s go get a Graeter’s.'”*
Graeter’s Grows Through Good Management, Organization, and Quality
Graeter’s began as a tiny Cincinnati business and now enjoys a national reputation for the quality of its premium ice cream. Once a small local business, today Graeter’s has a state-of-the-art factory, ships ice cream and other products across the United States that are sold in major supermarkets, and has an e-commerce site where customers can order merchandise online. All of these production and marketing activities helps Graeter’s to generate more than $125 million in sales each year. Even though the company is expanding, it still clings fiercely to its original small-batch production method for making creamy ice cream from fresh ingredients. CEO Richard Graeter emphasizes that profits are important, but “staying true to who you are and investing in your business is what makes sure that your business is going to be here tomorrow.” That’s why Graeter’s still makes all of its ice cream by hand, ensuring that the texture and taste meet its high standards batch after batch, year after year.
More Than a Family Affair
Graeter’s top-management team includes the CEO and two additional fourth-generation Graeter family members. Bob Graeter is in charge of operations and quality assurance. Bob is responsible for manufacturing, as well as for developing new products and finding suppliers to provide ingredients such as fresh fruits, cream, eggs, and chocolates. Chip Graeter oversees all of the company’s retail operations. Rounding out the management team are a chief operating officer, a vice president of sales and marketing, a vice president of operations, a plant manager, a controller, and consultants that help the company plan for expansion.
“Every major decision, we make on a consensus basis,” Richard says, describing the equal partnership among the three family members. “That doesn’t mean we don’t have a different point of view from time to time, but … we learn to see each other’s view and discuss, debate, and get down to a decision that all of us support. The other thing that we have learned to do, something that is a little different than our parents’ generation [did], is bring in outside people into the … executive level of the management team… We now work with consultants to help us plan our strategy to look for a new vision, to develop training programs … all those systems that big companies have.” Even with growth and expansion, executive-level managers still stay in close contact with employees at all levels and don’t hesitate to ask for their input when solving problems and making decisions.
Inside the Org Chart
Graeter’s formalized its organization structure over the years as it opened more stores and expanded beyond Cincinnati. Today, the store managers report to a group manager, who in turn reports to the vice president of retail operations. Graeter’s sets weekly and monthly sales goals for its stores, based on each unit’s location and other factors that affect demand. If a store doesn’t meet its goals, the group manager acts quickly to find out why and to help the store get back on track. To make sure employees and store managers are providing great customer service, managers “shop” each store every month, checking on quality and service. These management visits are supplemented by two monthly visits from “mystery shoppers” who buy ice cream and other products on different days, observing what employees are doing and taking note of what else is happening in the store. Their written reports give Graeter’s top managers another view of the business, this time from the customer’s perspective.
At the company’s main production facility, employees in each of three shifts are supervised by a shift manager, who reports to the vice president of operations. The first and third shifts are responsible for ice cream production, while the second shift is in charge of cleaning and sanitizing the facility.
What’s the Plan?
For a small business like Graeter’s, changes often come quickly, and even with robust planning for the future, there are surprises. A while back, the company was constructing its second factory to support the drive for nationwide distribution when an unexpected opportunity arose: to buy out the last franchise company operating Graeter’s retail stores and take over its factory as well. The management team jumped at the chance. “A few months ago, our strategy was just operate one plant,” says Richard. “Now our strategy is, adapt to the opportunity that came along. Now, the goal is to make the best use of our assets.” The newest Graeter’s facility, on Regina Graeter Way in Cincinnati, was built with the capacity to produce as much as 1 million gallons of ice cream per year. Many steps, such as putting lids on packages and moving them into refrigerated storage, are handled by automated equipment. Yet all of the ice cream is still made in small batches and by hand. Experienced technicians wield a paddle to gradually mix in ingredients such as molten chocolate, which have been pasteurized on the premises to comply with government regulations. Once the ice cream reaches the right temperature and texture, another employee hand-packs it into individual packages, which are then automatically capped, stamped with a date code, sealed, and whisked away to be kept cold until being loaded onto trucks for delivery to supermarket customers. Ice cream samples from every shift’s output are tested to ensure purity and quality.
As the company explores the possibility of opening Graeter’s stores as far away as Los Angeles and New York and selling more ice cream and other products in new markets, the management team is planning carefully and assessing the potential challenges and advantages of coast-to-coast operations.*
